Kenya: Bankers Association Opposes Proposed 16% VAT on Financial Transactions

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The Kenya Bankers Association (KBA) has urged the Government and National Assembly to reconsider the proposed 16% Value Added Tax (VAT) on financial transactions outlined in the Finance Bill, 2024.


Key Concerns:


  • Bank Charges: Raimond Molenje, Acting CEO of KBA, emphasized that bank charges are cost recovery, not direct payments for goods or services, and should not be subject to VAT.
  • Affected Services: The bill proposes VAT on services such as:
    • Issuance of credit and debit cards
    • Telegraphic money transfers
    • Foreign exchange transactions
    • Cheque handling and processing
    • Issuance of securities for money
    • Insurance consultancy services


Potential Impacts:


  • Increased Costs: The combined VAT and Excise Duty would raise total taxation on financial services to 40%, impacting affordability and accessibility.
  • Financial Inclusion: Higher banking costs could hinder efforts to include low-income individuals and small businesses in the financial system.
  • Economic Growth: VAT on foreign exchange transactions could reduce the competitiveness of Kenyan products, deter foreign investment, and negatively affect the tourism industry.
  • Market Stability: Increased costs could drive transactions to the black market and offshoring of large foreign exchange transactions.


KBA’s Position:


  • John Gachora, Chairman of KBA and CEO of NCBA Bank: The introduction of VAT on banking transactions, akin to Tobin and Robinhood taxes, will increase the cost of basic banking services and credit, making Kenya less competitive globally.



Source: kenyanwallstreet.com

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